Ag Growth International (TSE:AFN) reported third-quarter 2025 results showing year-over-year growth in revenue and adjusted EBITDA, while management also addressed a filing delay tied to accounting and internal control matters in Brazil and outlined steps to remediate a related material weakness in internal control over financial reporting.
Q3 results: revenue up 9%, adjusted EBITDA up 4%
For the quarter, AGI posted consolidated revenue of CAD 389 million, up 9% year over year. Adjusted EBITDA was CAD 71 million, a 4% increase from the prior year. Adjusted EBITDA margin was 18.2%, down about 100 basis points from last year, which management said was primarily due to mix shifting toward commercial projects.
Filing delay and Brazil internal control material weakness
Management said AGI’s third-quarter filings were delayed because the company required additional time to “confirm and finalize the accounting treatment” of operations in Brazil after internal channels identified financial reporting and internal control matters requiring further evaluation. Householder added that, over a short period, AGI launched a new business model, secured several large projects, and formed an investment fund to support current and future projects—steps that improved profitable growth but increased complexity for financial reporting and audit review.
According to management, the audit committee conducted an independent and comprehensive review focused on Brazil, and the company identified opportunities to improve financial reporting processes and internal controls related to Brazil. The findings were determined to constitute a material weakness in internal control over financial reporting. Executives said remediation actions are underway and described the goal as strengthening the foundation to handle complex Brazil opportunities and avoid future filing delays.
In the Q&A, management characterized the weaknesses at a high level as including:
- Segregation of duties challenges typical of newer business activities with fewer people involved
- Need to enhance technical accounting knowledge and training for complex deal structures and legal agreements
- Additional review processes to ensure the right internal oversight
Executives said the review was focused on Brazil and that there were no reasons or concerns to extend the review to other regions. They also stated there was no restatement as a result of the review, while noting that some remediation actions (such as training and knowledge transfer) will take longer to complete and the material weakness could not yet be considered remediated.
Commercial strength led by Brazil; order book heavily weighted to commercial
Management emphasized strong commercial segment performance driven by large-scale international projects, with Brazil highlighted as a “standout contributor.” CFO Jim (last name not provided in the transcript) said the commercial segment’s adjusted EBITDA margin expanded to 19.5% from 17.9% year over year, citing increased volume, project execution, and disciplined cost control. EMEA also contributed meaningfully, supported by major project execution in the Middle East and Africa.
At quarter-end, AGI’s order book was approximately CAD 667 million, up slightly year over year. Management said the order book was over 90% commercial, which increases sensitivity to the timing of securing large commercial projects and can create “lumpiness” in order intake. Executives said the company has shifted toward higher-value projects with longer execution timelines to improve revenue visibility and customer relationships while partially offsetting weak farm market demand.
Farm market remains pressured; early order program feedback cautious
In the farm segment, management said revenue declined year over year, with mixed regional performance. Brazil improved quarter over quarter in revenue and order book; the U.S. saw only a slight revenue decline and early signs of order book stabilization; and Canada softened after a strong 2024 and was described as broadly in line with the U.S. Executives pointed to low commodity prices pressuring farmer income and dealer inventory for portable equipment remaining above historical levels, despite declining through the third quarter.
AGI said it launched its annual early order program for portable grain handling equipment and adjusted it for the current environment. Early feedback suggested purchasing trends “may mirror last year’s weak performance,” and management said it was too early to call a trough in the overall market. Executives said uncertainty in the North American farm market is expected to persist into early 2026, citing low crop prices, high dealer inventories, and ongoing uncertainty around tariffs and subsidies.
Cash flow, leverage, and Brazil receivables monetization fund
AGI reported a net debt leverage ratio of 3.9x, flat quarter over quarter. Management attributed the leverage level to “sizable, but temporary” working capital investments supporting large projects, particularly in Brazil. Operating cash flow was described as strong, while free cash flow was impacted by additional project financing requirements in Brazil.
To address this dynamic, AGI discussed an investment fund structure in Brazil intended to monetize long-term financing receivables tied to large commercial projects. Management said the first monetization occurred shortly after Q3, with initial inflows collected in Q4, and additional inflows expected in early 2026. In the Q&A, executives said the administrative process in Brazil (including legal registration of collateral) can be onerous and is driving timing, though they emphasized no funding risk and said investors and committed capital are in place.
Executives said AGI has previously discussed monetizing 60% to 80% of sales amounts at a minimum on applicable deals, while retaining some financing internally. They also said the company expects positive free cash flow in 2026 once the fund is “up and running and moving very smoothly,” adding that the structure should allow AGI to pursue large deals without consuming working capital to fund project costs.
Separately, management said it initiated a payables optimization program with a Canadian financing institution to improve terms and extend average payables with certain high-volume suppliers, supporting cash flow and working capital.
Looking ahead, management said fourth-quarter adjusted EBITDA is expected to be lower sequentially and versus the prior year due to challenging market conditions, negative mix, and higher SG&A costs versus last year’s comparatively lower base. The CFO attributed the SG&A year-over-year dynamic largely to a prior-year adjustment to bonus accruals that lowered SG&A in Q4 2024.
About Ag Growth International (TSE:AFN)
Ag Growth International Inc manufactures portable and stationary grain handling, storage, and conditioning equipment, including augers, belt conveyors, grain storage bins, grain handling accessories, grain aeration equipment, and grain drying systems. The company operates mainly in Portable handling, permanent handling, storage and conditioning, livestock, and manufacturing sectors. Some of its brands are batco, wheatheart, westfield, storm, rem, hi roller, union iron, hsi, tramco, ptm, vis, nuvision, twister, grain guard, airlanco, westeel, frame, and entringer.
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